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Everyone knows you’re supposed to be proactive
and assertive when you take out a mortgage, carefully collecting
and evaluating all sorts of information before you make the
biggest deal of your life. But when the mortgage broker starts
shooting sheaves of papers (OK, PDF documents) at you, it’s easy
for your eyes to glaze over at the sight of so many zeroes, and
tempting just to start signing whatever it takes to get that
house!

Here are 5 questions every smart buyer (or refi-er) should add to
the list of issues to cover with your mortgage
professional:

Are you a bank, a broker, or both? Generally speaking,
mortgage lenders that are banks or have their own banking
divisions (which many reputable brokerages do) have more control
over the appraisal process, including the ability to submit your
file to a pool of appraisers they know have some knowledge of
your local neighborhood. Given the fact that non-local appraisers
and the inability to communicate with appraisers under relatively
new guidelines for brokerages are responsible for killing loads
and loads of deals, working with a company that is or has a bank
could be a deal-saving move, especially if the property is in an
area that hasn’t had many recent sales or is otherwise
challenging to appraise.

Also, some broker/banks that originate loans and sell them
straight to Fannie Mae or Freddie Mac under the FHA loan programs
offer the same benefits of an FHA loan - low down payment and
moderate qualification guidelines - without the “overlays”
imposed by some larger banks, which actually place a more
restrictive set of guidelines on FHA loan programs. For example,
FHA guidelines do not impose a minimum credit score, but many
banks overlay their own 640 minimum FICO requirement.
Broker/banks that sell straight to Fannie and Freddie often
mirror the FHA minimum guidelines precisely.

Finally, brokerages with their own in-house bank and a large
roster of lenders and programs provide the advantage of offering
a wider range of fallback options than plain old banks or plain
old brokerages - Plans A, B, C and D, if you will - which many
borrowers need these days, in the (increasingly common) case your
first choice bank or loan program doesn’t work out.

Will you explain my Good Faith Estimate to me? May I also have a
fee sheet or estimate of funds to close? The current, national
standard Good Faith Estimate (GFE) is pretty clear, clarifying
all sorts of deal points, from the broker’s commissions to the
costs associated with the loan, but as a point of customer
service, you should ask your mortgage pro to explain it to you
(if they don’t do so under their own initiative).

The one shortfall of the the latest edition of the GFE is that,
while it clearly shows the costs associated with a particular
loan scenario, it does not always show so clearly the actual
amount of funds you’ll need to close the transaction (which might
be more or less than those costs)! So, ask your mortgage
representative to prepare a fee sheet or an estimate of funds to
close as early in the transaction as possible.

How long will it take to close my loan? How much time will I need
for loan and appraisal contingencies? The time frames for
closing your mortgage - which often drive the time frames for
closing your home purchase - often vary widely depending on the
type of loan and even the type of lender you work with.(Large
bank loans originated by the bankers who sit inside the branch
are notoriously slower to close, on average, than loans
originated by brokers.) Similarly, the time it takes to get
through the FHA loan appraisal and underwriting process might be
much longer than it would take, all things being equal, to clear
those hurdles and remove your loan and appraisal contingencies on
a Conventional (i.e., non-FHA) mortgage.

When you first meet with your prospective mortgage pro, talk with
them about these time frames, so they can help you set realistic
expectations and insert realistic time frames into your offer
when you make it, to minimize the drama of a contingency clock
that ticks way faster than your mortgage process.

Are there any fees for the mortgage loan application/approval
process? Some lenders charge for credit checks up front, and most
require that you pay for your appraisal in advance (although the
latter happens only after you find and get into contract on your
property. One of the first questions you should ask, when you sit
down with a new mortgage broker is how much cash you’ll have to
come up with just for the privilege of having them run your
application and take the first steps down the road to loan
approval.

How long have you been originating loans? And how long have you
been with your company? Mortgage pros who have been around for a
long time have the knowledge of advance troubleshooting,
workarounds and backup plans, and the current underwriting
practices it takes to get a loan closed in this restrictive
mortgage market. If you found them in some way other than a
referral, you can even ask for references from a few clients.
Most mortgage pros who have been in business for awhile will be
able to give you names and numbers of clients they’ve worked with
on multiple purchases and/or refis: that’s a very good sign.
You’ll rest a lot easier if you know that your loan is in the
hands of a seasoned pro who others like you trust with their
largest asset - and largest financial obligation.